BBC Radio misunderstandings about money

I feel pretty proud – I’ve listened to two BBC radio programmes today; one Free Thinking on Coins and The Magic Money on radio 3 and the other on radio 4 on the Covid Hangover.

I’m proud because mostly it was an effort to restrain my annoyance – there was very little but conventional economic talk. Even if in the radio 4 discussion Modern Monetary Theory was raised just once!

I thought John Kay was the better of the two contributors as at least, rightly, he thought private debt was much more of a problem than public debt.

However, Dame Minouche Shafik, director of London School of Economics and Political Science, former deputy governor of the Bank of England was, to my (probably naive) amazement, actually much less impressive.

It is true that they both agreed that, unlike individuals, governments were around for ever and so could afford to repay at length.

Fine, but they’ve missed that no individuals own a bank, as government does. So they omitted to suggest that it could create the money and repay in ten minutes time if it wished.

Although Kaye said borrowings were never likely to be repaid, Modern Monetary Theory was dismissed by Shafik as liable to impact the country’s credit worthiness… In a currency it itself creates – and from the director of the LSE! Quite extraordinary…

They then moved on to more conventional ideas of taxing in order to rectify the inequality that the pandemic has produced – at last!

Meanwhile the Free Thinking on R3 was little better.

Yes, Ann Pettifor emphasised that John Law said that money is a thing ‘by which’ not ‘for which’ we make a transaction, which is a good monetary point.

Her idea that creating money is always an obligation is fine but I find bizarre the suggestion that as you always have to pay it back there is much care and circumspection required.

If indeed money is an obligation then surely the sole source of that money creation can repay it at will… Ann Pettifor seems, remarkably, not to understand this.

She wants to expand economic activity, in order to generate tax revenue and, oh dear, to enable government, to eventually balance its books.

Then Kenneth Rogoff, who, for me had previously suggested little of interest, says that digital currency is likely to be widespread in China soon.

In China that will probably be a weapon of individual control.

Meanwhile could we perhaps get the Libertarian Tories to organise a digital currency in their own image?

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